24 August 2008

Insightful Knowledge

I am currently reading the very interesting marketing book "Creating Market Insight. How firm create value from market understanding", written by Dr Brian Smith and Dr Paul Raspin (Wiley edition).

I will surely write a few posts about this book but I'll start here with their definition of an insight in a business context:

For knowledge to be considered insight, it must pass what the authors call the VRIO test. Knowledge must be
<< · "Valuable": Does this knowledge enable the firm to respond to environmental threats and opportunities?
· "Rare”: Is this knowledge currently held only by the organisation and not by its competitors?
· Not easily Imitable: Is it costly or difficult for other organisations to obtain or develop this knowledge?
· Organisationally aligned: Is the firm organised, or can it be organised, to exploit this knowledge?
The authors do not mean that non-insight knowledge isn’t useful of course. But they attempt to differentiate knowledge that is merely useful from knowledge that is insightful.

I think it is an interesting framework but I am not convinced about their definition of valuable knowledge:
Knowledge is valuable if it enables us to change something, rather than maintain things, and that change is valuable to either the customer or to the firm.”

Although the authors approach this from a marketing point of view, I really struggle to agree with the notion that valuable knowledge must imply change. The authors themselves acknowledge that “the value test is a contentious and difficult one to apply t to a piece of knowledge.”
One problem with this view is that it risks to prioritize in the mind of managers all the ideas and projects that imply change. Ideas and projects to improve existing activities would not be given enough attention and resources. But often it is such improvement that sparks the creation of new knowledge, that in turn will lead to a “valuable” change. In other words, a change providing competitive advantage does happen in an improvements-rich context that cannot be completely dissociated from the change. So without a good dose of “useful” knowledge, the “valuable” knowledge wouldn’t be created at all, let alone lead to an insightful change.

Furthermore, stating that the change must be valuable to either the customer or to the firm does not help at all to define valuable knowledge, since any piece of knowledge that isn’t meeting this characteristic cannot even be considered useful to the firm!

I think the problem with this definition of insightful knowledge is the use of the word “valuable”. I cannot yet put my finger on it but there should be another way to define what the authors had in mind without the too simple differentiation through subjective value. When I think of something, I’ll post it here.


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